Energy storage systems have great potential in maintaining the power balance and sustaining the grid frequency during sudden disturbances to support the automatic generation control in a power system. Hence, the role of a capacitive energy storage unit as an energy storage device and a thyristor-controlled phase shifter in the automatic generation control of a two-area interconnected power system having multiple gas-hydro-thermal mixed generating units in a deregulated power environment has been investigated in this paper. The recently developed sine-cosine algorithm is used to search the optimal gains of the proportional-integral controller using the integral of time-multiplied absolute error criteria. In addition, the effectiveness of the sine-cosine algorithm tuned proportional-integral controller is also compared with the popular particle swarm optimization algorithm tuned proportional-integral controller in different contract (unilateral, bilateral and contract violation cases) scenarios of the proposed deregulated power system. The impact of the coordinated action of the capacitive energy storage and thyristor-controlled phase shifter units has been validated on the area frequency, tie-line power, and generated power of different units. The analyses revealed that sine-cosine algorithm optimized proportional-integral controller with a capacitive energy storage unit give better dynamic response in all scenarios of the deregulated electricity market under different operating conditions. (C) 2018 Elsevier Ltd. All rights reserved.